Benefits Planning: A Forward Thinking Approach

1. Benefits Planning: A Forward Thinking Approach Presented By: Liz Davidson Founder and CEO, Financial Finesse, and Linda Robertson Senior Resident Financial Planner, Financial Finesse CFP®, CEBS, ChFC, MSFS

2. Today’s Objectives • Review the benefits landscape from an employee perspective and an employer perspective • Identify gap between employee needs and employer strategies • Establish cost of poor benefits education and planning • Calculate ROI of successful benefits education and planning • Discuss how you can implement a successful benefits education and planning program for your employees

3. The Changing Benefits Landscape http://www.census.gov/newsroom/releases/archives/income_wealth/cb10-144.html Center for retirement research at Boston College: An Update on Pension Data, 2004 http://www.ama-assn.org/amednews/2010/10/11/bisb1011.htm http://ehbs.kff.org/pdf/2009/7937.pdf

4. Greater Cost Sharing Requirements on Employees

5. Challenges from Employees’ Perspective • More choices—options are more complex • More changesto plans which adds to confusion • More burdenfor funding benefits themselves • Uncertain marketand troubled economy • Tendency to react emotionallyto uncertainty and buy/sell investments at the wrong time, exacerbating portfolio losses • Emotional adjustment to later retirementand fears about health care changes • Increased cynicism of both employers and financial services industry: • Not sure who to trust for information and help they desperately need.

6. The Benefits Landscape: From An Employer’s Perspective Information gathered from MetLife’s 8thAnnual Study of Employee Benefits Trends, 2010

7. Challenges From Employers’ Perspective • Cost containment—Due to financial challenges, employers are passing more cost onto employees at a time when employees can least afford the cost. • Disgruntled employees unhappy with benefits changes • This is driving increased dissatisfaction and declines in morale. • SHRM predicting a surge in turnover once economy recovers. • Operating with lean benefitsand HR staff • Legal environment becoming tougher on employers

8. How Have Employers Adapted to This New Environment? • 38% had planned to cut company subsidized benefitsin 2009. • 75% froze or reduced salaries or delayed raises. • 70% increased communicationin the past 12 months. • 12% increased voluntary benefitsin the past 36 months. • Key communication changes: • Employers increased use of total rewards statements. • Employers targeting workforce population with customized communication. • Employers offered one-on-one benefits communication and planning. • Employers made benefits resources more accessible for employees. • http://www.lifeandhealthinsurancenews.com/Issues/2010/March-15-2010/Pages/The-Latest-Voluntary-Benefits-Trends-.aspx • Watson Wyatt : Communicating with employees during the current financial crisis • Watson Wyatt: Effect of the Economic Crisis on HR Programs • http://www.orcpa.org/about/news/1/789-communicating_benefits_with_ease • http://www.employersinc.com/content.aspx?cid=104

9. How Do Employees Feel About Steps Employers Are Taking? http://www.growbold.com/home/2009/11/employee-loyalty-on-the-decline.html . Employee-benefits-trends-study.pdf MetLife

10. Employer Report Card on Benefits Planning

11. The Cost of Poor Communication • Delayed retirement for workers who are ready to retire. Causes: • Increased health care costs. • Increased salary costs. • Turnover among high performing employees who are unable to move up the ladder. • Low Morale—employees are less productive, frustrated and dissatisfied with benefits. • Poor retention and inability to attract talent in the future. • 25% of employees leave if not participating in benefits vs. 10% turnover among those who participate in benefits. • High Turnover Costs. Turnover related costs represent more than 12% of pre-tax income for the average company and nearly 40% for companies at the 75th percentile for turnover rate. 2004 CWCA Study http://www.shrm.org/Research/Articles/Articles/Pages/ManagingforEmployeeRetention.aspx

12. ROI of Good Benefits Communication and Planning • Can significantly reduce number of employees who delay retirement, saving thousands per employee per year. • 92% of employees who participate in financial education about their benefits take action to better manage their finances and benefits within 30 days. • Lower turnover of talented employees • 77% of employees who feel their employer does a good job in benefits communication are satisfied with their jobs. • 69% of employees feel benefits are an important reason to stay with their employer. • Lower health care costs due to decreases in financial stress and better adoption rates of health and wellness programs that prevent serious illness. MetLife 8th Annual Study of Employee Benefit Trends

13. ROI: A Case StudyThe Cost of Employees Unable to Retire • Assumptions • Current Age: 40 • Projected Age @ Retirement: 65 • Plan Contribution (% of salary) 4% • Company Plan Contribution 4% • Rate of Return (in Fixed Assets) 6% • Retirement Plan Account Balance $50,000 • ResultThis employee cannot afford to retire at age 65! They must work 3 additional years... Source: Finedco. http://www.finedco.com/roi.html

14. Cost To Company • How much does the employee’s inability to retire cost the company? • Estimated Wages $258,866 • Associated Costs $103,546health insurance, worker’s compensation, vacation days, etc.—calculated at 40% of salary $360,413 • Cost of Replacement with younger employee? • Estimated Wages/Associated Costs $135,942 The difference is $126,421 at retirement or $52,487 in today’s dollars Source: Finedco. http://www.finedco.com/roi.html

15. Financial Education Improves Retirement Plan Deferral Rates 11.00% 9.14% 8.61% 7.44% 5.77% 1 2 3 4 5 or more Number of Interactions with financial education services. As quantity of financial wellness interactions increases, deferral rate increases.

16. Case Study: Aetna Success formula: • Added financial wellness programs to their existing wellness program • Provided a comprehensive and personalized program so that the experience is tailored to the individual needs of each employee • Leveraged technology to reach a large number of employees • Branded benefits planning initiative and send out communications on a monthly basis to keep employees interested in the program. Financial Finesse Quarterly: Aetna’s Award Winning Financial Wellness Program

17. Case Study: Mortenson Success formula: • Do formal and informal assessments to determine your employees’ educational needs. • Create a new, memorable marketing campaign each year to get employees’ attention. • Change with your employee population and adapt as needed. Financial Finesse Quarterly: M. A. Mortenson Company’s Successful Retirement Education Program

18. Best Practices • Communicate company changesfrom the employee perspective. • Start with their financial goals and show how your benefits can help them achieve their goals. • Make it easy for employees—set up auto-enrollment and auto-escalation in 401(k) plan. • Use education to prevent opt-outs of auto-enrollment and enhance success of auto-escalation. • Make financial education a part of your wellness program. • Financial stress is the leading cause of stress-related illness. • Incorporate a multi-level benefits planning program. • Programs have proven to be most successful when they incorporate a broad array of learning channels to meet every employee’s style.

19. How You Can Implement a Plan That Works Step 1:Approach benefits communication and benefits planning as ongoing, not an annual task. • Employees spend an average of only 30 minutes choosing their benefits. Ongoing communication helps employees make better decisions about their benefits. Step 2:Determine your employees’ benefits planning needs. • Conduct formal and informal assessments of your employees most pressing benefits concerns and challenges. Step 3: Provide a multi-channel program in order to reach all employees. Step 4:Conduct ongoing research to keep pace with your changing workforce as their knowledge increases with benefits planning education.